Chautauqua County Executive George M. Borrellos 2020 Tentative - - PDF document

Chautauqua County Executive George M. Borrello’s 2020 Tentative Budget Presentation

Presented to the Chautauqua County Legislature on September 25, 2019 Thank you Mr. Chairman, members of the Legislature, my fellow county employees and everyone here tonight. It’s my pleasure to be here to outline my tentative budget for 2020. I’d like to start off by thanking everyone involved in developing this budget including all department heads and managers. I’d like to especially thank Finance Director Kitty Crow and Budget Director Kathleen Dennison and their team in the Finance Department for their efforts and diligence. Also, many thanks to my

CHAUTAUQUA COUNTY OFFICE OF THE COUNTY EXECUTIVE

Gerace Office Building – 3 N. Erie St. – Mayville, NY 14757-1007 (716) 753-4211 – FAX (716) 753-4756 – borrellog@co.chautauqua.ny.us - www.co.chautauqua.ny.us

GEORGE M. BORRELLO County Executive

assistant Dan Heitzenrater for helping me to distill this down into this budget presentation. This year we faced a new reality here in the Empire State . . . Sorry I have the wrong Empire. This year we faced a new reality here in the Empire State. A shift in the State legislature has led to dramatic increases in new unfunded mandates, new

regulations and new burdens on local government and taxpayers. This new reality, along with other hurdles including unmet obligations by the State, created a challenging scenario for our 2020 Tentative Budget. Let me highlight just a few of the challenges we faced going into this budget

• process. New York State’s tenuous agreement with the Seneca Nation of Indians

to share revenues under the Tribal Compact is a strained situation. Payments to the State are in litigation right now and money owed to the municipalities, including Chautauqua County, have not been paid since 2016. Even though the dispute is

• ngoing, those payments are the State’s obligation to municipalities and should

not be effected by negotiations between the State and the Seneca Nation. To date, the State is in arrears to Chautauqua County to the tune of about $2.2

• million. That will increase to about $3 million next year. So, after three years of

delays and broken promises, we have chosen not to budget for this funding in the coming year.

New, and largely unfunded, election reforms have created a large gap in our Board

• f Elections budget for 2020. While we are hopeful that early voting may increase

voter participation, it will come at a high cost to local government. Increases in the State’s minimum wage along with a dramatic increase in Election Inspector work hours for the 10 days of voting will result in a local share increase of about $115,000 just to meet the minimum requirements set by the State. Adding in the costs of new electronic poll books, the net increase in local share for the Board of Elections in 2020 is estimated to be a total $205,000, which equates to a nearly 22 percent increase in the Board of Elections local share costs.

So-called criminal justice reforms will have a major impact on counties across the State in 2020. Not only will the State’s cashless bail plan force the release of criminals onto our streets - with nothing but an appearance ticket - it will create an unnecessary burden on county government. When those accused don’t show up for their court dates, our county law enforcement officials are responsible for bringing them in for trial. Sheriff Jim Quattrone has stated that he will need a “warrant squad” to accomplish that requirement. That will heavily burden law enforcement and the taxpayers. In addition to cashless bail, the new unrealistic rules for discovery - which is information that must be turned over in court cases - will strain our District Attorney’s Office, Sheriff’s Office and Probation Department. According to our DA, Patrick Swanson, currently only 20 percent of cases require full discovery and it is typically completed over the course of months. Now, with these new mandates, 100 percent of cases will require discovery and it must be turned over within 15 days. This will mean hundreds of hours of additional work that must be completed in a compressed timeframe and - you guessed it - without any financial support from the State. Both our District Attorney and Sheriff have outlined the challenges facing county government with these new unfunded mandates in the coming year. But the State’s lack of guidance, training and funding for this new reality will create unpredictable situations and outcomes. Therefore, we must be prepared for the inevitable fallout from both a public safety standpoint and a budgetary standpoint.

When the NRG plant in Dunkirk was generating power, not only was it a key economic driver, NRG was also the single largest taxpaying entity in the county. The transition aid we receive from the State was designed to bridge the tax revenue gap while the plant converted from coal to natural gas. But now, with that re- powering being taken off the table, the dwindling financial support is creating a growing deficit. You can see from this chart how that support dwindles. The county is working with the City of Dunkirk on a feasibility study to reimagine the future for the power plant and I am confident we will be successful. In the meantime, that loss of tax revenue must be adjusted for in our budget.

That’s a summary of just some of the challenges we face and how it impacts

• ur budget. Those are the stark realities. So what does all this add up to for

us? It added up to us starting this budget process with a $6.8 million shortfall. So if we had stayed with the status quo, it would have resulted in one of the following three scenarios:

To keep our tax rate flat at $8.37 per thousand would have required using $2.1 million out of the undesignated fund balance. That would result in the fund balance dipping 4.2 percent, which is well below the 5 percent level that is called for in our county financial management policy. The next option would be to increase the tax rate by nine cents to $8.46 per

• thousand. That is the maximum increase allowed while still staying below the tax

cap, but still using $1.4 million from the undesignated fund balance to do so. This would leave the fund balance at 4.6 percent with a tax rate increase and a fund balance below the 5 percent level. The third option to keep the fund balance above 5 percent was a tax rate increase

• f 26 cents per thousand.

Again, these were the options we had before we went back to work on the tentative budget. So how did we address this? We started off with a realistic assessment of our revenues and expenses. For example, we did not budget for the estimated $750,000 in tribal compact revenue, which I previously mentioned. On a more positive revenue note, the landfill’s revenue from 2018 was exceptionally good. So those proceeds are reflected in the 2020 budget, which is where that accrued revenue is supposed to be allocated.

Many positions throughout county government are currently vacant at any given

• time. Most of them are just temporarily vacant while the hiring process continues.

Typically many of those positions are budgeted for at a full year’s expense even though they may go months without being filled. We have analyzed those vacancies and applied those estimated savings in this budget. This gives us a more realistic estimate for payroll expenses in the 2020 budget. Keeping our county roads safe to travel on during the winter requires a tremendous amount of road salt. Each year, we estimate how much is needed and budget

• accordingly. This season, the cost of road salt is estimated to increase from $68

per ton to $76 per ton, which is a 12 percent increase. That will have a significant impact on next year’s budget for road salt, especially. So we have estimated as realistically lean as we can in this budget. As I mentioned before, the impact of the new discovery rules and other mandates is going to have a significant impact on our District Attorney’s Office. We have added a nominal increase in the DA’s budget to assist, but not as much as was

• riginally requested.

We started out 2019 with a very lean adopted budget as part of our Bushel Full of Pennies Budget. Then, as the year progressed, revenue shortfalls appeared and we made further modifications and operating cuts to the 2019 budget. As a result, we went into the 2020 budget with no surplus funds to carry over to start us off.

So with all of that said, let’s take a look at a little history of our county tax rates. If we go back to 2006, you’ll see that we had a property tax rate of $9.49 per

• thousand. Also, our sales tax rate was higher than it is now at 8.25 percent. Also,

in 2006 we did not have sales tax exemptions for clothing or home fuel like we do

• currently. Yet despite all of that, our tax rate today is about a $1.12 per thousand

lower than it was 13 years ago. If you look at the scenarios I presented earlier, the tax rates would have to increase to $8.46 -to the tax cap limit- while still using fund balance, or even higher to $8.63-beyond the tax cap- to close the gap without using fund balance.

If you look at the tax rate back in 2006 and adjust for inflation, which is how the tax cap is calculated, that $9.49 rate from 2006 is the equivalent of a $12.18 rate in today’s dollars. Today the county property tax rate is just $8.37 per thousand. A difference of $3.80 per thousand. That means we are delivering services here in Chautauqua County with an inflation-adjusted tax rate that is more than 31 percent less than it was in 2006, and with a lower sales tax rate. I am proud to say that we run lean and effective government here in this county.

In this 2020 tentative budget process, we asked each department to try to achieve a budget with no increase in local share. After they submitted their budgets, we asked them to go back and make cuts again. Finally, my budget team and I analyzed and scrubbed each department’s budget and made further cuts as well.

Part of bringing this budget together included looking at further

• pportunities for savings and revenues. In my state of the county address this

year, I outlined initiatives we were pursuing to save money and grow our revenues. One of the initiatives we have advanced is moving to a centralized purchasing

• system. We anticipate future savings from the economies of scale of centralized

purchasing. Also, we announced earlier this year that we are pursuing the transition of our landfill methane gas from generating electricity, at a net loss, to selling the methane gas itself for conversion into Renewable Natural Gas at a net profit to the

• county. This reversal from a loss to a gain is figured into the budget and is helping

to close the budget gap. Our countywide Fly Car EMS system has saved lives across the county by responding to thousands of emergency calls since it came on-line in late 2017. This year we moved that service to 24 hours a day, 7 days week and took the necessary steps that allow us to bill for those services. Going into 2020, we will further expand the service and billing, which I will detail later in this presentation. So all of this due diligence has resulted in a 2020 tentative budget that is a very lean proposal and has taken into account as many opportunities for savings and increases in revenue as possible.

As I mentioned earlier, the State’s nonpayment of tribal compact money has created a hole in our budget again this year. Every dollar of revenue counts in the lean operating budget we have here in Chautauqua County. So, to cover that loss, we are using about $1 million from the undesignated fund balance in the 2020 budget. Even though the use of funds from that fund balance is minimal in this large budget, and fund balance will still be above the minimum required by the county’s financial management policy, it would not have been needed if the State had simply met its obligation and paid the money owed to us, like is has with other municipalities including the City of Niagara Falls.

When looking at Full-Time Equivalents, or FTEs, we asked departments for reductions in new positions. As part of the final budget scrub, we reduced new positions even further for the final tentative budget. If you look at this chart, you’ll see that we have a net increase of about 20 FTEs. However, 18 ¾ of them are fully funded by other sources and do not increase local share. Therefore, despite all of the new unfunded mandates and added responsibilities, we have held the local share FTE increase to just under 1 ½ full-time equivalents.

I’d like to take a moment to highlight the undesignated fund balance, which is our rainy-day savings account. Having a reasonable amount of money in reserve is not just good budgeting, it also effects things like our bond rating. The better our county bond rating is the less we must pay in interest on the capital projects that we bond for, which saves us money. So having a healthy fund balance is important in a number of ways. We have had a fund balance that has been in a healthy range for several years now, even though we have lowered the property tax rate five years in a row. I am happy to say that despite beginning the 2020 budget process with a $6.8 million gap, we have reduced the amount of undesignated fund balance needed to close the gap to only $1 million. But as you look at this chart, holding the line on taxes going into future years will start to shrink the fund balance, as a percentage of the operating budget, and it starts to dip below the recommended level of 5 percent. So going into future budgets, this will need to be addressed to keep our fund balance above the minimum percentage and stay within the financial management policy guidelines. This will best be accomplished by growing our economic pie, which I will talk about later. So that now brings us to the county property taxes for next year. After all that I have outlined, and the challenges we faced, my proposed budget holds the line on the tax rate at $8.37 per thousand for 2020.

As you can also see from this chart, the tax levy will grow by 2.72 percent. The levy is based on the total increases in property valuation countywide. It stems from factors like property value appreciation and new construction. It’s this modest but significant growth in property valuation, along with lean budgeting, that allows us to hold the county property tax rate down. Growing the levy is about growing the total pot of money without increasing the tax rate. As we look toward the future, we want to explore new possibilities for our county and look for new opportunities.

As far as future revenue possibilities, I do believe that the state will eventually fulfill its obligation through the tribal compact. The poorly drafted agreement that led to this dispute between Albany and the Seneca Nation should not impact the municipalities that the State agreed to pay. Also, Chautauqua County is part of a class action lawsuit against the opioid

• manufacturers. Settlements are currently in the works and that will hopefully lead

to new revenue that will help offset the significant costs we have incurred locally in battling the opioid epidemic.

As we take further steps to create a more efficient county government, we are looking at all aspects and all possibilities. Recently we hired the Center for Governmental Research to conduct an analysis of county site locations, including

• ur many offices in the county, to see if there are opportunities to streamline our
• perations. While the study results were not expected for this tentative budget, I

am hopeful that the results could reveal opportunities that would have a positive impact on operational expenses in the coming year.

Talking about the future, we are again this year investing in our infrastructure and making improvements to the quality of life here in Chautauqua County. This effort is essential to maintaining our momentum and growing our economy. In our 2019 budget, we invested a record amount of money into supporting the Complete Streets program in our county. Improving our roadways to make them more pedestrian-friendly and more useful for biking, walking and other activities is not only good for our economy but it’s also good for overall health. I am proud to continue making this a priority for county government. Ever since my days as a county legislator and IDA board member, I have championed the need for more high-speed internet access throughout our county, especially in our more rural areas. We started that expansion a little over two years ago with an effort that was dubbed the “Fiber to the Farm” project. This state- funded partnership with DFT Communications is bringing critically needed high- speed service to previously unserved areas. Now in 2020 we plan to move ahead with further expansion, on a much broader

• scale. We are doing this in collaboration with our neighbors in Cattaraugus and

Allegany Counties, through the Southern Tier West board. As a member of that board, along with Legislator Jay Gould and Director Don McCord, we have pursued a grant through the Federal Appalachian Regional Commission that will bring broadband access to 4,195 residences, 437 small business locations, 87 farms and 18 tourist destinations throughout the region. This big step forward will not only improve critical internet access for existing homes, farms and businesses, it will also improve property values and expand

• pportunities especially for those looking to relocate their families and their

businesses to our region. Here in Mayville, we are also making needed improvements. The most notable, as I am sure you have noticed, is the expansion of the parking lot. This is something that has been talked about for years. Thanks to the work of DPF Director Brad Bentley and his team, and with the support of this legislature, we are moving forward with the first phase this year and further phases will be completed in 2020. This is not only good for the morale and safety of our fellow employees but also for the hundreds of others who visit this campus each day.

Our quality-of-life improvements will continue in 2020 with investments in transportation and emergency services. With our new partner, Boutique Airlines, and the support of a broad spectrum of local business, community organizations, and this legislature, we have resubmitted

• ur joint application to the U.S. Department of Transportation for the return of

commercial air service to the Chautauqua County Jamestown Airport. This improved plan will offer daily service to both Pittsburgh and Baltimore Washington airports and will include the convenience of early morning flights and evening returns allowing for easy connections to literally hundreds of destinations in the U.S. and around the world. In 2019, we started the improvement of our CARTS bus service. We successfully tested Saturday service this summer, which we are now continuing and making it permanent going into 2020. This expansion will assist residents who rely on CARTS and also allow tourists, shoppers and others to use the convenience of scheduled bus service on the weekends. Of course one of the biggest quality-of-life concerns for residents and visitors is critical care, especially in an emergency. As I mentioned previously, we expanded

• ur county EMS Fly-Car system this year and we began billing for those services.

Now, we are going to take that opportunity for more billable services and add a fourth fly-car to the system in 2020. This move will allow county EMS to further support other local emergency response agencies with life-saving assistance around the county without a negative impact on the budget.

In 2020, the proposed capital projects will see improvements in a number of areas, from replacing bathrooms at the beautiful Luensman Overlook Park to critical safety and security projects for Jamestown Community College and the county’s technology infrastructure. We will continue investments in equipment and in county facilities to ensure that we can deliver services effectively and efficiently. Also part of capital projects investments for 2020 includes the next phase of our Brownfield Development Strategy. This effort is focused on taking former contaminated industrial sites and marketing them for development with the assistance of State and Federal tax credits. Brownfield redevelopment is being done successfully now in our county, most recently with the Sonwil Frozen Storage project that is nearly complete in Dunkirk. Having sites that are assessed and ready to go will give Chautauqua County a key strategic advantage in pursuing future development opportunities. My thanks to Deputy County Executive Mark Geise for leading this worthwhile economic development effort.

In 2020 our county occupancy tax is projected to continue to increase thanks to our growing tourism and hospitality industry. In the coming year, we will continue to invest those proceeds in tourism and the protection and enhancement of our precious lakes and waterways. The amazing collaboration momentum we started this year with the Chautauqua Lake Consensus Strategy and Memorandum of Agreement will continue in 2020 with further expansion of our support and investment in the improvement of Chautauqua Lake. In this tentative budget, we are allocating $150,000 to in-lake maintenance along with the continued leadership and resources that has resulted in the great progress we have made together. Chautauqua County is home to a beautiful grape belt region. The heritage of our grape industry and the expansion of wineries and other agri-businesses in the region is highlighted and supported by the Grape Discovery Center. The Center is located in the heart of the Lake Erie Wine Country and is a catalyst for the region’s continued growth. This year we will assist the Grape Discovery Center in its mission to promote our wineries and other attractions, and also preserve the rich heritage of grape-growing in Chautauqua County by investing in its future success. Speaking of heritage, we will also continue our investment in historical preservation and increase the support for local historical organizations. Our county’s rich history is an important element of our tourism economy and is a source of community pride. I believe it’s our duty to make sure that it’s protected and preserved.

Also in this tentative budget, we have included financial support of Countywide Partnership for Economic Growth (CPEG). This is a new initiative that will foster unprecedented collaboration for economic and community development. Tourism and hospitality is the fastest growing industry in Chautauqua County and is a primary driver for both sales and bed tax. So the support for the CPEG will help us to continue to grow this important part of the economy. Part of looking to the future is having a path forward to continue to “grow the pie” of our tax base. Improving revenues means growing our economy and making that base of revenue larger so each person and business’ contribution is a smaller part. Growing our tax base is essential to providing services without increasing the tax burden on our businesses and residents. In 2020, we will be supporting projects and initiatives that help us grow the economic pie like the Countywide Partnership for Economic Growth that I just mentioned. Also, this legislature chose to support the Project Grow Chautauqua hops and grains initiative this year. That has now transformed into Empire State Brands, a game-changing agri-business initiative that will move forward in the coming year.

Another key component of growing our economy is ensuring that our businesses are able to successfully recruit and retain people. Local businesses shared their recruiting challenges with us and we responded with a new recruiting effort that highlights the wonderful place that Chautauqua County is to live, work, raise a family, and own a business. We recently released this new recruiting brochure and that effort will expand next year into a comprehensive campaign. I’d like to once again thank Mark Geise and Don McCord, along with their small but dedicated team, for this amazing effort and great results. The most unique and important natural assets in Chautauqua County are our beautiful lakes and waterways. We are truly blessed to have them and they are a major economic driver. Protecting, promoting and improving our lakes and waterways are critical to our economy, our quality of life and our future. Developing this tentative budget proposal started with many challenges. I am proud of the hard work put forth by so many people, in challenging the status quo, looking for new opportunities and never taking our eye off of the goal of developing a responsible budget that delivers those needed services without an increased burden on the taxpayers. We have good government here in Chautauqua County. We set aside party politics and do what’s in the best interest of the people. We are an example of what can be accomplished when we all work together. I am proud to work with each of you and I look forward to an even brighter future in the coming year. Thank you all very much.